Rising LNG costs, halted production projects in Iraq and new risks in the Persian Gulf are hitting one of Japan’s most important independent energy producers.
• Japan Petroleum warns of pressure on profits
• Higher costs due to unplanned LNG spot purchases and production interruption
• High oil prices and a weak yen probably cannot offset the burden
In the midst of an already tense situation on the global energy markets, Japan Petroleum Exploration has announced a significant impact on earnings. The background is the escalating tensions in the Middle East, which are interrupting supply chains, increasing procurement costs and affecting production activities. LNG deliveries from the Gulf region are particularly affected, as they had to be replaced at short notice by more expensive spot purchases, which, according to the company, is putting noticeable pressure on margins.
LNG as a cost trap in a crisis environment
The situation on the market for liquefied natural gas is currently particularly serious for Japan Petroleum Exploration. According to the company, the company normally procures liquefied natural gas (LNG), which is used as a raw material for natural gas supply and as a fuel for electricity generation at the Fukushima natural gas power plant, through framework contracts and other agreements. Due to the ongoing blockage of the Strait of Hormuz, Japan Petroleum had to source replacement deliveries on a spot basis from other production areas for two LNG deliveries from the Persian Gulf originally planned for the first quarter of fiscal year 2026. “As a result, procurement costs for the LNG in question are expected to increase significantly compared to levels prior to the escalation of tensions in the Middle East,” it said in a press release.
Production stop in Iraq affects the funding side
In parallel to the rising import costs, the company is also losing income on the funding side. The Garraf oil field in Iraq, in which Japan Petroleum has an interest through a consolidated subsidiary, has suspended production and supplies due to a declaration of force majeure by the Iraqi government. A date for the resumption of funding is currently not foreseeable. Therefore, no income from the project can currently be expected, according to the company.
Higher oil prices probably cannot compensate for failures
Although the sharp rise in oil prices due to the Middle East conflict and the current weakness of the yen would contribute to higher revenues and profits, the higher costs due to the unplanned spot purchases and the interruption of production in the Garraf oil field could still cause a significant decline in profits, warns Japan Petroleum.
However, the financial impact of these factors and their impact on the profit forecast are still being examined; the company plans to publish new information on May 13th.
However, investors on the stock market have already reacted with sales: Japan Petroleum Exploration shares fell by 7.67 percent to JPY 2,168 in Tokyo on Monday.
Signaling effect beyond Japan Petroleum
The case of Japan Petroleum Exploration is an example of how sensitively even established energy companies react to geopolitical upheavals. While many investors reflexively interpret rising crude oil prices as a profit driver for mining companies, current developments reveal a more nuanced picture: In integrated business models, the same crises can simultaneously increase costs, stop production and destabilize supply chains.
The latest warning should therefore be understood less as an isolated corporate problem, but rather as an indicator of a phase of increased uncertainty in the global energy markets. Therefore, the shares of Shell, BP, Chevron and Exxon Mobil are likely to come into the focus of investors on Monday. Exxon had also already signaled weaker profits despite high oil prices.
The shares of BP and Shell were last seen in London before the weekend 7.36 percent weaker at 5.41 pounds and 5.57 percent lighter at 31.96 pounds, while Exxon Mobil shares ended Friday trading on the NYSE 3.65 percent lower at 146.44 US dollars and Chevron papers ended trading at 183.99 US dollars with a discount of 2.21 percent were.
Things are looking up for British energy companies in the new trading week: BP temporarily rose by 3.23 percent to 5.59 pounds, while Shell gained 2.74 percent to 32.84 pounds.
Carolin Ludwig, editorial team at finanzen.net
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